Lawsky Reviews Private Equity’s ‘Troubling’ Insurance Role

April 18 (Bloomberg) -- New York’s financial regulator is
scrutinizing what he called the “troubling role” of private
equity firms as they expand into the insurance industry through
acquisitions, according to a speech today.

Private-equity firms “may not be long-term players in the
insurance industry and their short-term focus may result in an
incentive to increase investment risk and leverage in order to
boost short-term returns,” New York Department of Financial
Services Superintendent Benjamin Lawsky said today in prepared
remarks. “This type of business model isn’t necessarily a
natural fit for the insurance business, where a failure can put
policyholders at significant risk.”

Leon Black’s Apollo Global Management LLC has agreed to buy
four insurers since 2008, including a $1.8 billion deal in
December for Aviva Plc’s U.S. life and annuity business. A firm
owned by Guggenheim Partners LLC shareholders agreed the same
month to buy a variable-annuity unit from Sun Life Financial
Inc. for $1.35 billion.

“DFS is moving to ramp up its activity” monitoring
private-equity firms’ role, he said today, without naming
companies, at the Hyman P. Minsky Conference in New York. “We
hope that other regulators will soon follow suit.”